Spill's long-term effects on renewables unknown

Coast Guard crews battle flames on the doomed rig.

When BP’s [NYSE: BP] Deepwater Horizon offshore drilling rig sank in late April, sending crude oil flooding into the Gulf of Mexico, speculation about what the catastrophe would mean for the nation’s energy future jumped into high gear.

While political insiders were divided on how the spill might impact climate change legislation, with its provisions to expand offshore drilling, environmental groups and renewable energy backers held it up as a call to arms for a shift away from fossil fuels.

Author Thomas Friedman in the New York Times wrote, “The oil spill is to the environment what the subprime mortgage mess was to that market”: namely a wake-up call and a chance to strengthen support for a move away from fossil fuels.

Despite a slight uptick in oil prices immediately after the April 20, 2010 event, analysts said the spill was unlikely to drive up oil prices in the longer term. But on a smaller scale, the spill could help break down the cost barrier for renewable energy adoption. Getting people to accept solar in spite of its price tag is a big challenge for the industry, says Grayson Morris director of sales operations for San Francisco–based solar financer SunRun. A catastrophe such as the Gulf oil spill throws a spotlight on the real cost of fossil-fuel energy, and could provide a push to get people to adopt renewables, Morris says.

“It’s sad that it has to be highlighted this way,” Morris says. “[But] there’s a market connection.”

While the tragedy may drive change on the consumer front, it’s less likely to have a direct impact on large-scale renewable projects, since such ventures are built around long-term investments, says San Diego–based lawyer Morten A. Lund, a partner with Portland-based law firm Stoel Rives. He primarily works with clients on the development and financing of renewable energy projects.

Indirectly, though, the Gulf spill could propel larger projects if it bolsters support among lawmakers and encourages legislation that puts a price on carbon and supports renewable energy. “We do rely heavily on incentives, and if [the spill] would spur those, then it could have an impact,” Lund says.